Jul 31, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Monday morning greetings from the home office. Please remember that you can shoot me scoop or feedback via email (just hit reply), anonymous tip (http://axios.com/tips), Twitter DM (@danprimack) or confidential apps like Signal, Telegram and Confide (Dan Primack / 857-472-3072). Here we go...

Top of the Morning

The biggest variable in Uber's CEO search has become SoftBank Group, and whether or not it offers to buy out a number of the ride-hail giant's early investors. If such a deal were to go through, Uber's cap table could be simplified/restructured in such a way as to restore Travis Kalanick to some seat of power.

  • Why it matters: Uber is the venture capital industry's single most important portfolio company, with the ability to return entire funds for around a dozen different firms. Conversely, a valuation collapse could be devastating for the limited partners of such funds, whose investment committees may already have baked in the on-paper riches (and who certainly have used those "returns" to make follow-on fund commitments).
  • The once & future king: As we noted last week, Kalanick is not content to hang out on Uber's board of directors. He wants back in on operations, telling friends that he views his situation similar to that of Steve Jobs (apparently forgetting that Jobs founded an entirely differently company between his Apple CEO stints). He is said to have been emboldened by the 1,500 or so Uber employees who signed a petition asking for his return (and not dissuaded by the many more who opted not to sign).
  • The path: Kalanick's big problem right now is one of power. In short: He doesn't have enough. But if SoftBank were to buy out board enemies like Benchmark Capital, then he could hold much more sway — and maybe even bring former allies Ryan Graves and Garrett Camp back onto his side. Yes, it's as convoluted as it sounds. But it's also plausible, given that I'd be loathe to dismiss the possibility of anything that involves SoftBank dollars.
  • Key caveat: As of last Friday, there had not yet been formal negotiations between SoftBank and early shareholders, which means the devil could certainly be in the pricing details. Sources also say that SoftBank would want to staple a primary investment onto the secondary.
  • Final note: There has been some talk that Meg Whitman bailed due to media leaks over her conversation about becoming CEO, and the board dynamics around such a decision. This is, in part, accurate. But also don't discount a subsequent leak to Bloomberg about Jeff Immelt being considered, which a source tells me was Whitman's final straw. And, for the record, it seems that the Immelt consideration is now past tense.

More ride-share: Lyft has added former Obama advisor Valerie Jarrett as its first independent director.

  • Kia notes that Jarrett had done an on-stage interview with Lyft antagonist Travis Kalanick last summer, where they bonded over the issue of criminal justice reform.

Econ lexicon: Ben Adams of FierceBiotech this morning has a piece on Patrick Soon-Shiong's NantCell agreeing to pay up to $369 million to license an orphan cancer drug from listed pharma company CytRx. Only $13 million of that is up-front, and Adams refers to the remaining earn-out payments — which are anything from certain — as "biobucks."

Tax talk: This is the week that the White House pivots from healthcare to taxes, although we still know very little of Trump's wish-list besides that one-pager released back in April (plus, presumably, that the final package must be "tremendous"). That means the corporate rate discussion could be anywhere from 15% to 25%, while issues like interest deductability and carried interest treatment remain up in the air. House leadership last week did give up the BAT ghost — at least for now — but that only exacerbates the fissure between those who insist on revenue-neutrality vs. short-term deficit spikers.

Where in the World? I'll be in Brooklyn on Thursday night, interviewing 1776 CEO Evan Burfield as part of Challenge Cup NYC, where 19 startups will pitch for the chance to compete in the global Challenge Cup finals. More info here.

The BFD

Charter Communications said last night that it is not interested in acquiring Sprint Corp., despite interest in such a transaction by Sprint majority owner SoftBank Group.

  • Why it's the BFD: You mean besides the fact that SoftBank is slowly worming its way into every section of this newsletter? Okay, because Charter's rejection is not the end of this mega M&A story. There are various reports that SoftBank is now prepping a straight takeover offer for Charter, which has a current market cap north of $100 billion. And, were that to fail, SoftBank always could take another stab at merging Sprint with rival carrier T-Mobile (which was blocked by Obama's FCC, but may get a more positive reception this time around).
  • Bottom line: "It's been a furious season of speculation about possible telecom deals. Sprint could benefit from a deal with Charter or another company to help it compete with Verizon and AT&T, and companies that offer wired service can diversify by getting into the wireless space or investing in content. An agreement between Charter and Comcast means the former couldn't merge with Sprint without the blessing of the latter." — David McCabe, Axios
Venture Capital Deals

• Shopex, a Shanghai-based provider of e-commerce software and services, has raised around $105 million in Series D funding. Joy Capital led the round, and was joined by K2VC, New Alliance Capital, Tianxing Capital, Gopher Asset Management and CBC Capital. http://bit.ly/2hfsM1s

🚑 Menlo Therapeutics, a Menlo Park, Calif.-based drug developer focused on chronic pruritus and chronic cough, has raised $50 million in Series C funding. VenBio led the round, and was joined by Novo Holdings, Rock Springs Capital, Aisling Capital, Bay City Capital, Vivo Capital, Presidio Partners, Remeditex and F-Prime Capital. www.menlotherapeutics.com

• SimplyCook, a London-based meal kit startup that only provides the extras (e.g., spices and sauces), has raised £2 million in new VC funding from Maxfield Capital, Episode 1 Ventures, 500 Startups and individual angels. http://tcrn.ch/2ubDUOd

• The Big Willow, a Wilton, Conn.-based provider of software for B2B marketers, has raised an undisclosed amount of VC funding from Connecticut Innovations and Stonehenge Growth Capital. www.thebigwillow.com

Private Equity Deals

• AE Industrial Partners has agreed to acquire CDI Corp. (NYSE: CDI), a Philadelphia-based provider of IT consulting and staffing services , for approximately $155 million, or $8.25 per share (33% premium on Friday's closing price). www.cdicorp.com

• Ares Management and Redevco have partnered to purchase Mercado San Miguel, a gastronomic market in Madrid, for €70 million. http://bit.ly/2uQ4dey

• The Blackstone Group is in talks to acquire a majority stake in the property portfolio of Spain's Banco Popular. http://reut.rs/2vXucRu

• I Squared Capital has agreed to acquire Hutchison Global Communications, a Hong Kong-based fixed-line phone operator, for $1.9 billion in cash. This beats out a rival takeover offer from TPG Capital and MBK Partners. https://bloom.bg/2wdKt46

• ShowClix, a Pittsburgh-based provider of event ticketing solutions, has raised an undisclosed amount of equity funding from Providence Strategic Growth. www.showclix.com

• Vista Equity has completed its previously-announced take-private purchase of Xactly (NYSE: XTLY), a San Jose, Calif.-based provider of cloud-based incentive solutions, for around $564 million, or $15.65 per share. Sellers include Rembrandt Venture Partners (8.3% stake), Bay Partners (7.64%), Alloy Ventures (7.46%), Key Venture Partners (7.26%) and T. Rowe Price (6.93%).

Public Offerings

• Two companies are expected to price IPOs on U.S. exchanges this week: Clementia Pharmaceuticals and Venator Materials. http://bit.ly/2uQ3iea

Contura Energy, a Bristol, Tenn.-based provider of provider of metallurgical and steam coal, has set its IPO terms to 6 million shares being offered at between $23 and $27 per share. It plans to trade on the NYSE under ticker symbol CTRA, with Citigroup listed as sole underwriter. www.conturaenergy.com

• Stitch Fix, a San Francisco-based fashion subscription service that has raised over $45 million in VC funding, has confidentially filed for an IPO, according to TechCrunch. http://tcrn.ch/2veAzTv

Liquidity Events

• H.I.G. Capital has sold Albertville Quality Foods, an Alabama-based processor of protein-based foods, to a subsidiary of Industrias Bachoco (NYSE: IBA). No financial terms were disclosed, except that AQF generates around $270 million in annual revenue. http://bit.ly/2uN1GDw

🚑 LabCorp (NYSE: LH) has agreed to acquire Chiltern International, a UK-based contract research organization, for $1.2 billion in cash. Sellers include Intermediate Capital Group. http://reut.rs/2vY110W

🚑 Welsh, Carson, Anderson & Stowe has agreed to sell Aptuit, a Greenwich, Conn.-based provider of drug development services, to Germany's Evotec for $300 million in cash. http://reut.rs/2tQBrsY

More M&A

• Anbang, the Chinese conglomerate whose U.S. holdings include the Waldorf Astoria hotel, has been asked by Chinese regulators to sell its assets outside of China, per Bloomberg. The company itself says it has no plans to sell. https://bloom.bg/2vkp1hq

• Discovery Communications (Nasdaq: DISC) has agreed to buy Scripps Networks (Nasdaq: SNI) for $14.6 billion in cash and stock, or $90 per Scripps share. http://bit.ly/2tQx69v

• Snapdeal, an Indian e-commerce company, has rejected a $950 million takeover offer from larger rival Flipkart. Reuters reports that Snapdeal backers Kalaari Capital and Nexus Venture Partners had joined the company's co-founders in opposing the transaction. Snapdeal did say, however, that it will sell its Freecharge payments business to Axis bank for $60 million. http://reut.rs/2tWfGfv

Erick Thorir is seeking a buyer for DC United, the Major League Soccer club of which is he majority owner, according to the NY Times. Raine is managing the process, which reportedly could garner $500 million. http://nyti.ms/2vjP2xt

Fundraising

• Newgate Private Equity has acquired Arle Capital Partners, the London-based private equity firm that manages the legacy Candover funds. http://bit.ly/2vXzaxI

• SAIF Partners, an Indian VC firm focused on tech startups, has closed its sixth fund with $350 million in capital commitments. http://tcrn.ch/2uPNY1b

• Union Capital, a Boston-based private equity firm focused on lower mid-market industrial tech companies, is raising up to $150 million for its second fund, per an SEC filing. www.union-park.com

It's Personnel

• Bill Chu has joined Goldman Sachs as a managing director on the firm's China investment banking services team. He previously was with Deutsche Bank. http://cnb.cx/2veL7Bh

Dan Primack